More Proof of Economic Madness in China: China Public Debt is 80% of GDP, Not Official 17%

A copy of Manhattan, complete with Rockefeller and Lincoln centers and what passes for the Hudson River, is under construction an hour’s train ride from Beijing. And like New York City in the 1970s, it may need a bailout.

Debt accumulated by companies financing local governments such as Tianjin, home to the New York lookalike project, is rising, a survey of Chinese-language bond prospectuses issued this year indicates. It also suggests the total owed by all such entities likely dwarfs the count by China’s national auditor and figures disclosed by banks.

Bloomberg News tallied the debt disclosed by all 231 local government financing companies that sold bonds, notes or commercial paper through Dec. 10 this year. The total amounted to 3.96 trillion yuan ($622 billion), mostly in bank loans, more than the current size of the European bailout fund.

There are 6,576 of such entities across China, according to a June count by the National Audit Office, which put their total debt at 4.97 trillion yuan. That means the 231 borrowers studied by Bloomberg have alone amassed more than three-quarters of the overall debt...

Fraser Howie, the Singapore-based managing director of CLSA Asia-Pacific Markets who has written two books on China’s financial system.

“You should be more worried than you think,” he said of Bloomberg’s findings. “Certainly more worried than the banks will tell you.

“You know how this story ends -- badly,” he said.

The centrally planned manipulation of the Chinese economy, including massive amounts of money printing, could result in the greatest economic crash of all time.

The US has debt/GDP of 100%. The EU has debt/GDP of about 100%. If China, the second largest economy in the world, has debt/GDP of 80%, who are the creditors? Where does those money come from? Isn't this sound a bit unbelieveable?

China does have lots o foreign reserves but it's local munis are sated with loads of debt. If you read the book "red capitalism" it gives a detailed account of how bad china is with that reguard and how fragile there banking system is.

So, China is in equally bad shape compared to the US, EU, and Japan? What is the implication? All these countries can now laugh at each other and start raising debt again, to perhaps 300% debt/GDP? Is this sustainable? It looks to me the guesstimation of 80% debt/GDP is just to give an excuse for the US and EU to print more money.

Some detail on how the private companies in China are also engaged in balloning the GDP. I recently imported from China goods for 4300 USD and then found out that my Chinese supplier declared in his export declaration 10.300 This amount will go in the official Chinese statistics and here in this small example we see the export encrease more than twice. And I am sure that many Chinese companies engage in such things as there is a clear motive - they can increase their VAT reimbursement in such a way. On the other hand I am sure that it is not unique to China, in any country that has VAT some companies will be doing similar things.